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APPENDIX B-FACTS AND COMMEN IS ON search title and perform related settlement SECTION 8 WHICH PROVIDE FURTHER services in connection with their transacCLARIFICATION OF REGULATIONS

tion. B and A have an understanding that in

return for the referral of this business A The following illustrations provide addi

will provide legal services to B or B's offitional guidance on the meaning and cover

cers or employees at abnormally low rates age of Section 8 of RESPA. While particular

or for no charge. illustrations may refer to particular provid

Comments. Both A and B are in violation ers of settlement services, such illustrations

of Section 8 of RESPA. are applicable by analogy to providers of

5. Facts. A, A provider of settlement sersettlement services other than those specifically mentioned. It should be noted that

vices, pays referral fees to persons who refer

settlement business on commercial real other provisions of Federal or state law may

estate to A. be applicable to the practices and payments

Comments. While commercial transactions discussed in the following illustrations.

are not covered by RESPA, the payment of :. Facts. A, a provider of settlement ser

such referral fees would be a violation of vices, maintain and abnormally large bal.

Section 8 if they involve indirect compensaance in a non-interest bearing account with

tion for the referral of settlement business B, a mortgage lender, pursuant to an under

covered by RESPA. standing that B will refer borrowers of Fed

6. Facts. A, a real estate broker, obtains all erally Related Mortgage Loans tu A for the

necessary licenses under state law to act as purchase of settlement services in connec

a title insurance agent. A refers individuals tion with the settlement of such loans.

who are purchasing homes in transactions Comments. Allowing B to use the deposit

in which A participates as a broker to B, a ed funds at no interest appears to be a thing

title company, for the purchase of title inof value given by A to B pursuant to an

surance services. A fills out a simple form agreement or understanding that business

but performs no other services in connecincident to a real estate settlement shall be

tion with the issuance of the title insurance referred to A in violation of Section 8 of

policy. B pays A a commission for the transRESPA. The maintenance of any accounts

actions. reasonably needed by A in the normal

Comments. The payment of a commission course of its business would not be a viola

by B to A under circumstances where no tion of Section 8.

substantial services are being provided by A 2. Facts. B, a lender of Federally Related

to B is a violation of Section 8 of RESPA. Mortgage Loans, pays A, a real estate agent,

7. Facts. A, a "mortgage originator" or a fee of $25 per transaction purportedly for

“mortgage broker", receives loan applicaservices performed such as arranging for B's

tions and refers borrowers to lenders for a appraiser to visit the property. The purport

fee. ed services for which the fee is paid are ser

Comments. If A performs services such as vices that real esstate agents frequently per

obtaining credit and appraisal information form as part of their services and the fee is

or preparing an application for mortgage inreally intended to enable B to compensate A

surance or guarantee which are of value to for referring potential borrowers to B.

the Lender paying the fee, without referComments. Both A and B are in violation

ence to the referral value of such services, of Section 8 of RESPA, since the fee is

and the fees paid bear a reasonable relationheing paid in compensation for the referral ship to the value of such services, the payof business rather than for legitimate ser ment of such a fee would not be in violation vices actually rendered by B on behalf of A. of Section 8 of RESPA.

3. Facts. A, a provider of settlement ser 8. Facts. A, a title insurance company, provices, provides settlement services at abnor vides among its other services an "insured mally low rates or at no charge at all to B, a Closing Service Letter". Under this letter, builder, in connection with a subdivision for which no separate or additional charge being developed by B. B agrees to refer pur is made, the company agrees to provide inchasers of the completed homes in the sub demnity against loss due to certain fraududivision to A for the purchase of settlement lent or negligent acts of the company's services in connection with the sale of indi policy-issuing agents or approved attorneys vidual lots by B.

in complying with closing instructions and Comments. The rendering of services by A in conducting the closing of any transaction to B at little or no charge constitutes a in connection with which a policy of title inthing of value given by A to B in return for surance is to be issued by A. the referral of settlement business and both Comments. Where A has provided such an A and B are in violation of Section 8 of Insured Closing Service Letter to a specified RESPA.

person and the protection afforded thereby 4. Facts. B, a Lender, encourages persons is effective without regard to whether the who receive Federally Related Mortgage particular case was referred to A by the Loans from it to employ A, an attorney, to person receiving protection under such

letter, the provision of the letter would not be pursuant to an agreement or understanding that settlement services be referred, and therefore not in violation of Section 8.

9. Facts. A, a service corporation, iş a title insurance agent for B, a title insurance company. The search and examination of title, in connection with applications for title insurance policies prepared by A, are performed by employees of B. Employees of B also make any determinations as to the insurability of title. A issues title insurance policies on behalf of B and receives a commission equal to the amount paid other title insurance agents in the community, including other agents of B, who perform the title search and examination as well as prepare and issue the title insurance policy.

Comments. While A may be performing some real service for B, the fact that the amount of the commission received by A is equal to the commissions customarily paid to full-service title insurance agents who perform substantially greater and more val. uable services indicates that the commission paid by B to A is really intended to compensate A for the referral of business. The amount by which the commission exceeds the reasonable value of the services rendered by A to B would be a referral fee prohibited by Section 8 of RESPA. Section 8 does not prohibit variations in the amount of commissions that may be paid, nor does it require that the quantum of services rendered be identical in all cases, so long as ser

vices significant to the issuance of a title insurance policy are rendered and the amount of the commission bears a reasonable relationship to the services rendered.

10. Facts. A, a real estate broker, refers title business to B, a company that is a licensed title agent for C, a title insurance company. A is part owner of B. B performs the title search and examination, makes de. terminations of insurability and issues & policy of title insurance on behalf of C, for which C Pays B a commission. B pays annual dividends to its owners, including A, based on the relative amount of business each of its owners refers to B.

Comments. While the payments of a commission by C to B is not a violation of Section 8 of RESPA, if the amount of the commission constitutes reasonable compensation for the services performed by B for C, the payment of a dividend or the giving of any other thing of value by B to A that is based on the amount of business referred to B by A constitutes a violation of Section 8. Similarly, if the amount of stock held by A in B (or, if B were a partr.ership, the distri. bution of partnership profits by B to A) varied in proportion to the amount of business referred or expected to be referred, or if B retained any funds for subsequent distribution to A where such funds were generally in proportion to the amount of business A referred to B, such arrangements would constitute violations of section 8.

FINDING AIDS

A list of current CFR volumes, a list of superseded CFR volumes, and a list of CFR titles, subtitles, chapters, subchapters and parts are included in the subject index volume to the Code of Federal Regulations which is published separately and revised annually.

Index
Table of CFR Titles and Chapters
Alphabetical List of Agencies Appearing in the CFR
Redesignation Table
List of CFR Sections Affected

INDEX TO TITLE 24

(Appears in all volumes. References are to part and section)

A

Part/Section
Additional Assistance Programs

Sec. 8-HUD-insured projects and HUD-held mort-
gages

886, Subpart A
Sec. 8-HUD-owned projects—to be disposed of and
rehabilitated....

886, Subpart B
Administrative Procedure Act
Board of contract appeals

20.5
Community development block grants.

570.913
Admission Policies–See Tenant Eligibility.
Advance Acquisition of Land
Application of Title VI............

1, Appx. A.
Grants for.............

491.
Relocation and Real Property Acquisition

42.20
Advances
Coinsurance

250.723
Group practice facilities

244.67
Hospitals.

242.53; 242.57
Public works planning.

490.
Urban renewal

500.3
Affirmative Housing

Employment Opportunities-HUD Assisted Projects .. 135.70
Equal employment opportunity in HUD.....

7.4
Financing new communities.........

720.22
Affirmative Fair Housing Marketing
FHA Housing programs

200, Subpart M
Low rent homeownership.

804.104
PHA acquisition

845.404
Section 8:
Housing finance/development agencies.......... 883.305; 883.309; 883.310;

883.314; 883.318
New construction............

880.204; 880.209; 880.218
Special allocations.

886.121
Substantial rehabilitation

881.204; 881.209; 881.218
Section 23:
New construction..........

800.205; 800.208; 800.217
Substantial rehabilitation

801.205; 801.208; 801.217
Agreement to Enter into Housing Assistance Payments
Contract
Section 8:
Existing housing..............

882.101
Housing finance/development agencies...

883.104; 883.202; 883.205;
883.210; 883.211; 883.312;

883.313; 883.315; 883.316; 883.702
Loans-elderly/handicapped.....

885.415
New construction.............

880.102; 880.104; 880.113;
880.115; 880.122; 880.123;
880.125; 880.211; 880.212;

880.214; 880.216

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